New Delhi: Retirement fund body EPFO plans to give an option to its subscribers to choose from various investment products where they want their money to be invested and a larger focus might be eventually on the equity market.
At present, the Employees' Provident Fund Organisation (EPFO) invests the incremental deposits received from its subscribers as per a specified investment pattern notified by the Labour Ministry.
"EPFO will eventually have to come with 3-4 models (of investment products) where larger part will be equity. We have to give options to our stakeholders.. Perhaps we will come to that stage in a year and two, where we will give options to our stakeholders...(and ask them) you decide," EPFO Central Provident Fund Commissioner K K Jalan said here.
Speaking at an Assocham conference here, Japan further said the people might want such an option going forward as they are becoming more financially literate.
"We should be prepared. I can assure you that EPFO is preparing itself for all these things in the future," he said.
Giving credit to the Finance Ministry for pursuing EPFO to start investments in the stock market, he said, "We have not decided to invest in equity. The Finance Department (Ministry) has forced us to decide. Finance Department decides where the provident funds can invest."
Elaborating further, he said, "It was the Finance Ministry circular in March that said provident funds must invest its funds in equity. With that circular coming, there was no option for EPFO (but to invest in equity).. Therefore we don't want to take any credit as far as investment in equity is concerned."
In April, the Labour Ministry notified an investment pattern which allows EPFO to invest a minimum of 5 per cent and a maximum of 15 percent investment in equity or equity related schemes.
This followed the Finance Ministry in March bringing out new investment norms for private provident funds in the country. It has provided for 5-15 percent of funds to be invested in the equity or equity related schemes.
According to a study by CRISIL, if a large number of older people end up having no pension, the government risks having to shoulder the heavy fiscal burden of providing minimum sustenance to them. Such a fiscal burden can rise to 4.1 percent of GDP, unless retirement sector gets the impetus it deserves.
Jalan also said that a panel on housing for subscribers has given its report and it will be reviewed soon.
The panel has suggested ways to facilitate subscribers for purchasing low-cost houses.
"We have suggested that EPFO can establish the credit worthiness of the subscribers purchasing houses, and his home loan EMIs can be paid through his EPF account," Bhartiya Mazdoor Sangh General Sectreaty Vrijesh Upadhyay said.
About 70 percent of EPFO subscribers have a basic salary of up to Rs 15,000 per month and the housing scheme is largely targetted at this segment.
